Early Retirement & Real Estate Exit Strategy

[Sridhar Ramakrishnan]

Early Retirement & Real Estate Exit Strategy

I am new to BP. I have been investing in SFR (Buy & Hold) for 18 Years. Last 2 Years, I am considering different ramp down strategies on my investments with a primary intention of retiring early. At times, I feel I should exit out of the challenges, expenses of a RE portfolio and start identifying alternate revenue sources. Partially I have found that strategy – buying tax-free muni bonds, trading via hedging strategies. I have fairly learnt this in the last 5 years and should be able to scale. The thought is, totally exit out of all my SFR investments go with the alternate route I mentioned above. Advantage – No Prop Taxes/Insurance/HOA, other fees, vacancies, expensive turn arounds for new tenants. I am also aware of the risk from my alternate strategy and in the last 5 years tested it.

Anyone 1) sharing similar views or experience 2)challenge this approach 3)pros & cons 4)precaution to take care if I decide to move forward in coming years.

In summary continue to stay invested in RE or Exit? Thanks

[Dave Foster]

@Sridhar Ramakrishnan, 18 years of appreciation and depreciation recapture is a bitter pill to swallow just to transition into defensive investments like munis.  In fact it's kind of ironic to be willing to pay so much tax to then invest in something where the main benefit is it's tax free nature.  You can still get where you want to go.  The 1031 exchange will be a key component.

1. Move from more to fewer properties - Consolidate into fewer buildings with on site managers 

2. Move from residential rentals with expenses to NNN commercial with no expenses.

3. Move from active to passive - Get out of management all together with TIC or DST fractionals.

4. Take the cash thrown off by these and retire and start to build your bond portfolio at that point without biting the bullet on all of the appreciation and depreciation recapture from your hard earned efforts have yielded.

5. Die - Not the greatest option for your retirement but an inevitable one none the less.  When you pass away your heir get a step up in basis of the properties so the tax on your gain and depreciation is eliminated for your heirs and they get the properties tax free to begin their own investing journey.